Breaking News

HP Denies Hewlett's Vote Was Needed

BRIAN BERGSTEIN

Published 8:00 pm, Sunday, January 6, 2002

AP Business Writer

The infighting at Hewlett-Packard Co. resumed Monday with the board accusing dissident director Walter Hewlett of misrepresenting his reasons for voting for _ and then publicly opposing _ the acquisition of Compaq Computer Corp.

In a letter filed with the Securities and Exchange Commission, chairwoman Carly Fiorina and seven other HP directors told Hewlett they were "particularly disturbed" by his recent contention he originally voted for the $24.7 billion deal only to help HP secure the best possible price.

Hewlett said in a Dec. 27 SEC filing that he voiced concerns about the deal at several board meetings, but that an HP lawyer told him the stock-exchange ratio in the deal would have to be reworked if it did not have the unanimous support of the board.

Hewlett said he was told he could approve the deal as a board member and vote against it as a shareholder, and that he made his intentions known even before the deal was announced Sept. 3.

The new letter from the other directors said that "to suggest that you were pressured into approving the merger is inaccurate and inappropriate."

"You were never advised that HP would be forced to pay a higher price for Compaq if you voted against the merger," the letter said.

The letter also said the board and management did not know Hewlett would vote his personal shares against the deal until a half-hour before he announced that publicly on Nov. 6.

However, at the time, HP management said it was not surprised by Hewlett's announcement. HP spokeswoman Rebeca Robboy said that was because management was aware Hewlett had concerns about the deal, even though he had not indicated definitively how he would vote his shares.

Hewlett opposes the HP-Compaq deal because he believes it is too risky, would lessen the contribution of HP's profitable printing division and increase the company's reliance on personal computers without effectively improving its services business.

HP and Compaq are awaiting regulatory approval before setting a date for a shareholder vote, but Hewlett already is lobbying other investors to oppose the deal. His opposition camp includes Hewlett and Packard family interests with 18 percent of HP shares.

The companies believe merging will make them a dominant player in key technology markets, improve their business-computing products and services and save them $2.5 billion a year.

"We collectively concluded that the merger represented by far the single best strategic alternative for the company," Monday's letter said. "Quite frankly Walter, you have never offered an alternative strategy that we all haven't debated and rejected."

The letter also criticized Hewlett for missing board meetings in which the merger was discussed.

A spokesman for Walter Hewlett said he could not immediately comment.

In a statement Monday afternoon, Hewlett said the letter from his fellow board members was "a careful construct of fine lines and half truths" that essentially confirmed his account of what happened.

Shares of Palo Alto-based HP fell 14 cents to close at $23.02 Monday on the New York Stock Exchange. Compaq gained 29 cents, or 2.6 percent, to close at $11.68, after the Houston-based company said fourth-quarter results will be better than previously expected.